The Oil Price To Be Scared Of - NYT

[hatrack]

EDIT

In early 1981, when the Iraq-Iran war caused an oil shock, a barrel of oil cost the equivalent of $86 in today's dollars. That number still seems a long way away, and OPEC is promising to pump itself dry to meet demand.

But consider this: it has taken less than eight months for oil prices to jump by $20 - from $46 to $66. Over the last year, oil prices have increased by 54 percent. In the past week alone, futures on the New York Mercantile Exchange rose to a record - $67.10 on Friday - the highest since crude oil began trading on the exchange in 1983. At this rate, oil prices might hit $86 a barrel sometime next spring.

Last month, Goldman Sachs predicted that prices could reach $80 a barrel if a hurricane were to destroy production platforms and pipelines in the Gulf of Mexico, which accounts for a quarter of American production.

And other worries abound, including growing tension between Iran and the West, the possibility of more pipeline bombings in Iraq, civil unrest in Nigeria, oil worker strikes in Venezuela and, most devastating, the fear of an attack on Saudi Arabia's oil industry. While the economy stayed upright at $50 a barrel, few economists are predicting the same for $80 and up.

EDIT

http://www.nytimes.com/2005/08/14/weekinreview/14basics.html

[benburch]

1. And there are other factors involved now.

The damage that price did in 1981 is pretty much on a par with $70 a bbl oil now.

[phantom power]

4. And that was temporary. This is going to be permanent.

[phantom power]

2. "OPEC is promising to pump itself dry to meet demand."

Wow, there's a comforting thought. Do the people who write these things pause to think about what we're going to do after OPEC "pumps itself dry?"

[Delphinus]

12. That was probably a rhetorical question,

but no, I don't think they use their brains. It's probably mandatory these days, especially in the mainstream media. It must comfort the masses, to hear that they'll pump themselves dry.

[phantom power]

13. It wasn't entirely rhetorical...

The phrase "pump themselves dry" is actually a re-statement of the problem--the oil will be gone! But there they are, saying it as if it was a solution: "If only OPEC would try harder to pump themselves dry, then these darn gas prices would go back down!"

I'm genuinely curious about what goes on inside other people's heads, when I read stuff like that. After all this time, I shouldn't be surprised, but sometimes the internal contradictions are so intense, that I'm amazed all over again at what people can swallow.

[Strelnikov_]

14. Yep. Another Great Moment In Journalism

Suspending logic in pursuit of a catchy phrase.

[opihimoimoi]

3. The consumption for oil is rising and the resouces dwindling

The Pubs are in an OIL GRAB...they want WAR, they want high prices...they want a major FAMINE to Happen.

They are an evil and selfish lot. Ignorant too.

[HereSince1628]

5. Mark me, oil will be at $86 before Christmas

The industry had just about met the big demand for home heating fuel in the northern hemisphere eight months ago. We are now looking down the gaping throat of that oil demand. Oil prices will rise faster, and refined oil prices even faster, since the US is at the limits of its refining capacity.

I expect the heating bill to be punishing this winter.

[jaxx]

9. The refining capacity is Bush's tool now

It's why they want to close bases, to use the space for new refineries. And shhhh, it's why some of our refineries are not working, or not working to capacity. There's always an angle to what the bushco's tout as truth. Oil prices help who.......the oil companies.

[phantom power]

10. More refineries might lower gasoline prices, but not crude oil.

Refineries use crude, they don't produce it.

Also, are you saying that Bush wants more refineries, or less?

[jaxx]

17. He wants more. Lots more.

Refineries at the closed bases. Why are some of them closed now, or at reduced capacity?

[phantom power]

18. I'm not following you. If he wants more, why are existing ones closed?

[The_Casual_Observer]

6. The old number was $70 before it got close to $70. Now it's $86

I smell shit.

[phantom power]

8. We haven't yet seen these prices ripple thru the economy.

According to one article I read, the price of oil at $50/barrel hasn't yet finished propagating. Never mind $70.

[Strelnikov_]

15. I Think I Saw CNN Throwing Around Numbers In The 90's Last Week

When we hit $90/bbl in January they will be saying it is still lower than the $120/bbl in 81.

And Jack Daniels is $105/gal, so why ya worried about $6.00/gal gas.

[purple in the south]

7. an arm and a leg

the price of oil is too high

[Bright_Future]

11. hmm...

A quick google using the terms "oil prices 1983 adjusted historical" found two sites claiming the 2004 inflation-adjusted peak for crude oil was for $66.20 (1981) and not $86. here's one:
http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp

I wonder where their numbers are coming from.

[Dogmudgeon]

16. That price was a spike, anyway

The increasing prices now aren't spikes, they're parts of the general upward trend in oil prices.

The prices will come down, too, but only because of fractal self-similarity of the data. It lurches up and down in response to market conditions, as it should. But if you've looked at a graph of the prices since about 2001, you'll see that the trend line is upward, and it's become steeper in the last two years.

Some of this is from the market; some is from problems in finding enough refinery capacity or transportation or other industry factors; but overall it's a reflection of reaching the end of the era of cheap oil. Profits are sky-high because it's an end run, the last years of high profitability. The switchover to a lower-profit, higher-priced, generally less-affordable commodity will not be pleasant, but it will happen soon.

Anyone who so much as sees it coming will come out ahead. Education and informing oneself are the keys.

--p!